The many initiatives unveiled in the Union Budget for 2016-17 on Monday are now being subjected to closer scrutiny. But a significant initiative that Finance Minister Arun Jaitley launched well before he presented the Budget has not received as much attention as it certainly deserves. This is the manner in which he went about conducting pre-Budget consultations and allowing the flow of communication about the process of framing the Budget.
Mr Jaitley's initiative is no less significant than the change another finance minister from the Bharatiya Janata Party brought about in the manner of Budget presentation more than a decade and a half ago. Presenting the Budget for 1999-2000, Yashwant Sinha, the finance minister in the Atal Bihari Vajpayee government, departed from the past practice of presenting the Budget at 5 pm on the last working day of February. Mr Sinha argued that the practice of presenting the Budget at 5 pm was a legacy of the British Raj as the timing presumably suited the British government's working hours. Thus, he chose to present it at noon. That departure became the norm in subsequent years.
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In the run-up to the Budget this year, two major decisions seemed to have been taken. One, top secretaries in the Union finance ministry were encouraged to share with the media the government's thinking on the key issues that are likely to be tackled in the Budget. Indeed, the finance minister himself and his deputy, Jayant Sinha, the minister of state for finance, used to great effect the various public forums where they had to speak. At those meetings, both the ministers were quite candid about explaining the thrust and direction of the forthcoming Budget.
Thus, Mr Jaitley would reveal at a meeting with parliamentarians that he would meet the current year's fiscal deficit target. Mr Sinha would talk about the Budget focus on agriculture and tax reform. Revenue Secretary Hasmukh Adhia would disclose that the government would meet its tax revenue targets for the first time after several years of slippages. Even Prime Minister Narendra Modi would pull no punches while announcing at a meeting with global business leaders the broad direction of the tax policy. Indeed, at a conference of Indian start-ups, Mr Modi outlined a policy package for them that his finance minister should reveal in the Budget.
Note that all these averments were made with less than two months to go before the Budget was scheduled to be presented. Unlike in past years, when policymakers were tight-lipped on Budgetary issues as early as from the end of December, this year it seemed glasnost over the Budget exercise had arrived. To be sure, nobody revealed any Budget secrets in this period, but there was a welcome end to the fetish over not talking about the Budget thrust at all for well over two months.
In the two months before the Budget, therefore, Mr Jaitley made public comments on fiscal policy issues on seven occasions. Mr Sinha bettered his senior minister with a dozen appearances where he spoke on Budget issues. Mr Adhia was a little more conservative by opening his mouth on Budget issues only thrice in this period. And Economic Affairs Secretary Shaktikanta Das spoke on fiscal policy matters on 11 occasions.
The second change that took place in the run-up to the Budget was the manner in which key Budget policies were allowed to be discussed and debated in the public domain. Fiscal consolidation and disinvestment were two such issues that became a subject matter of an open debate in which finance ministry officials took part often taking views that were not always similar.
The Mid-year Economic Analysis, presented by the finance ministry in December, mooted the idea of relaxing the fiscal consolidation road map that had been set in February 2015. The argument was that the economy was in dire need of higher public investments and this might require the government to relax the fiscal deficit target of 3.5 per cent of gross domestic product or GDP for 2016-17. This debate took place quite openly allowing policymakers and economists, both in the government and outside, to share their perspectives on this crucial issue.
A similar debate, though not as intense as the one on the fiscal consolidation road map, took place on disinvestment. Should the government allow strategic sale of state units? Or should the government opt for a special commission to facilitate disinvestment or simply go in for privatisation? Arguments on both sides were made and publicised. But that they were made before the Budget showed a distinct change in treating key policy issues that come up while framing the Budget.
Eventually, the government decided to stick to its originally envisaged fiscal deficit target for next year. Also, the Budget chose to stick to an ambitious disinvestment programme for 2016-17 and laid a special emphasis on agriculture and the rural sector. But what set apart this Budget from all the previous ones were the welcome signs of change in the government that allowed an open pre-Budget discussion of these issues and the manner in which finance ministry representatives spoke out on them freely in the run-up to the Budget.
It has often been argued that the secrecy around the Budget exercise is hugely overdone. As tax rates have become more stable, paving the way for a more rule-based and non-discretionary taxation regime, there is no reason why Budgets should not be framed in an open environment of free exchange of views and ideas before they actually get discussed and approved by Parliament. If what one saw this time in the run-up up to the Budget for 2016-17 is an indication of such progressive and reformist thinking, the finance minister and his team deserve the nation's compliments for launching yet another major path-breaking reform initiative.
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